March 25 (Bloomberg) -- Orders for durable goods and sales of new homes unexpectedly rose in February, reports today showed, a sign of improvement in two of the biggest drags on the U.S. economy.

Last month’s 3.4 percent increase in bookings for long- lasting goods such as machinery and computers was the biggest gain in more than a year and the first in seven months, Commerce Department figures showed in Washington. Another Commerce report indicated new-home sales jumped 4.7 percent from a record low pace in January.

Stocks rose as the figures, combined with earlier reports showing improvements in retail sales, residential construction and home resales, suggested the economy is stabilizing after shrinking last quarter at the fastest pace since 1982. Stepped- up efforts by the Obama administration and Federal Reserve to ease the credit crunch may help revive growth later this year.

“The more we get economic data points like these, the more there’s an indication that stabilization in the economy is starting to unfold,” said Jonathan Basile, an economist at Credit Suisse Holdings USA in New York.

The Standard & Poor’s 500 index rose 1 percent to close at 813.88 in New York. Treasury securities fell.

Home sales picked up as plummeting prices and cheaper mortgage rates lured some buyers. The median sales price fell 18 percent from February 2008, the biggest year-on-year drop since records began in 1964, and the glut of properties on the market dwindled.

Dwindling Jobs, Wealth

Demand for housing is still limited by the highest jobless rate in a quarter century and shrinking household wealth, indicating housing may not rebound quickly even as steps to cut borrowing costs and reduce mortgage defaults take hold.

“We still have a lot of supply to absorb before things get back to normal,” said Basile, who had forecast sales would rise.

The increase in new-home sales to an annual pace of 337,000 from January’s 322,000 compared with the median forecast of a drop to 300,000. Economists projected total durable goods orders would fall 2.5 percent, according to the median of 69 forecasts in a Bloomberg News survey.

Excluding transportation equipment, orders gained 3.9 percent, the most since August 2005. That compared with a projected decline of 2 percent, according to the Bloomberg survey.

Influence on Growth

Demand for non-defense capital goods excluding aircraft, a proxy for future business investment, climbed 6.6 percent after falling 11.3 percent the prior month, a decline that was almost twice as large as previously estimated. Shipments of those items, used in calculating gross domestic product, increased 0.6 percent last month.

Business investment in new equipment fell last quarter at the fastest pace since 1958, according to figures from Commerce. The government will issue its advance estimate on first-quarter gross domestic product in April. Economists surveyed by Bloomberg News earlier this month forecast the economy will contract 5.2 percent in the first three months of this year and 2.5 percent for all of 2009.

Orders excluding defense equipment increased 1.7 percent. Transportation equipment demand rose 2 percent, led by a 32 percent jump in defense aircraft and parts. Auto bookings fell 0.6 percent and demand for commercial aircraft slumped 29 percent after surging 166 percent in January.

Fewer Planes

Boeing Co. received four aircraft orders in February, down from 18 a month earlier, according to company data. The Chicago- based company may have to finance jet sales itself if it wants to maintain current production levels, according to aircraft lessors such as International Lease Finance Corp. Boeing has enough unfilled bookings to sustain output through the rest of the year as long as buyers can find financing.

The administration and Fed are working in conjunction to end the credit crisis. The Treasury Department earlier this week announced details of a public-private partnership plan to purchase as much as $1 trillion in devalued real-estate assets and other securities to revive lending, using $75 billion to $100 billion of its remaining bank-rescue funds.

The Fed, meanwhile, last week said it will buy as much as $300 billion in Treasury securities and an additional $750 billion in agency mortgage-backed securities, and that the central bank will keep the benchmark interest rate near zero for an extended time.

Limiting Foreclosures

The government also plans to spend $275 billion to help keep as many as 9 million Americans in their homes and reduce foreclosures. That program includes a tax break of as much as $8,000 for first-time homebuyers that wouldn’t require repayment.

The National Association of Realtors’ affordability index rose to a record in January, helped by lower home values and mortgage rates.

Today’s goods report also showed order backlogs dropped and companies trimmed stockpiles. Inventories fell 0.9 percent last month and unfilled orders declined 1.3 percent.

Smaller backlogs indicate manufacturing will be slow to recover even after the economy gains traction.

Bookings for military gear jumped 35 percent.

Lockheed Martin Corp. won a U.S. military contract with a potential value of $5 billion to support and supply special operations forces worldwide, the Pentagon said March 3. The so- called indefinite delivery, indefinite quantity contract runs through March 2018 and would reach its full value only if all options are exercised.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.netCourtney Schlisserman in Washington Cschlisserma@bloomberg.net

Last Updated: March 25, 2009 16:28 EDT